Getting Financial Aid…For A Jumbo Loan?

Financial Aid for Jumbo Loans?

Orange County, CA – Jumbo loans are for anything over $417,000 in most areas of the country. But that limit is raised in certain high-cost areas, including parts of New York City, Washington D.C., and of course the area around the Orange County and Los Angeles, California. In this neck of the woods, the limit is $625,500.

A variety of government agencies and other organizations have started to recognize the existence of a small but economically vital group of people that live in areas demanding jumbo loans just to get into modest homes. They have formed financial aid packages for these jumbo-mortgage borrowers.

In the past, such ‘financial assistance’ has typically come from the person’s employer: part of a relocation package, an advance on a bonus, or an employer-facilitated second mortgage. For example, some universities offer their tenured faculty up to $40,000 as a one-time perk to help them cover a down payment, closing costs, or toward other real estate costs. Stanford is known for it’s interest-only second mortgages that can be used to cover up the price or fair market value of a home (up to $600,000.)

But since last fall, many banks and credit unions have been slowly and quietly rolling out options for that thin slice of homebuyers who have near-perfect credit, a high net worth, but simply don’t have the liquidity to purchase a new home in an all-cash deal. One such program requires an 11% down payment and finances up to $1.25 million, but is only available as a 5, 7, or 10-year mortgage — and of course requires you to have a 720 credit score, significant assets, and a debt-to-income ratio of no more than 38%.

Banks and credit unions aren’t the only ones offering assistance for jumbo loans, however. The Federal Housing Association offer government-subsidized loans with limits of up to $729,750 in some of the nation’s highest home-cost areas, and they require only a 3.5% down payment. The credit score limit is nominally 580, but realistically with a loan over $625,000 and a credit rating below 620, it’s unlikely to go through.

So what happens if you manage to use these clever tools and obtain yourself a jumbo loan? If you put less than 20% down on a home, you are required by law to get private mortgage insurance, which will increase your monthly payment and may also increase your interest rate above that of a standard jumbo loan. However, true conventional jumbo loans require a minimum of 20% equity. But the size of the loan itself will means the payment will be higher.

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